Reports of the death of the consumer have been greatly exaggerated, according to the latest Retail Sales report from the government. Overall retail sales rose by 1.3% in November from October, and are now up for the first time on a year-over-year basis — 1.9% higher than last November.
The path of year-over-year total retail sales is shown in the graph below (from http://www.calculatedriskblog.com/). The year-over-year change in retail sales bottomed a year ago at over 10%, and remained extremely depressed until recently. In October, the year-over-year change was a negative 2.0%.
If we exclude autos, retail sales rose 1.2% from October and are up 1.3% year over year. Ex-autos, retail sales were unchanged in October from September (the numbers are seasonally adjusted) and were down 2.8% from October 2008. Retail sales at car dealers like AutoNation (AN) were up 1.6% from October and are up 5.1% year over year.
The surge in auto sales can no longer be ascribed to the Cash for Clunkers program. It is evidence of real retail demand for the classic big-ticket durable good. The increased willingness to spend on big ticket items is also visible in the pattern of which types of stores are doing well. Most noticeable of these was a 2.8% monthly gain for electronics and appliance stores like Best Buy (BBY), although sales are still down 3.4% year over year.
Retail sales at hardware stores like Home Depot (HD) gained 1.5% on the month. They still have quite a bit of ground to make up from a year ago, though; on a year-over-year basis, retail sales in that category are down 9.3%. Still that is quite an improvement over the 1.8% monthly decline in October which brought their year-over-year decline in that month to 14.3%.
One glaring exception to the generally stronger tone among the more cyclical of retailers was a 0.7% monthly decline at furniture stores, where retail sales are still down 7.9% from a year ago. Even there, though, the year-over-year declines are moderating.
Last month, the year-over-year decline was 8.5% in that category. The weak retail sales of tables and chairs has to been seen as a disappointment, though, given the recent strength in existing home sales (people usually will redecorate when they move into a “new” house). General merchandise — which includes department stores like Macy’s (M) — retail sales rose by 0.8% for the month and are now up 1.8% for the year.
The biggest increases, though, had very little to do with the overall strength in the economy. Sales at gas stations surged 6.0% for the month and are up 8.9%. That has more to do with a rebound in gasoline sales than a sudden surge in people deciding to eat the hot dogs off the rollers at service stations.
The second graph (also from http://www.calculatedriskblog.com/) shows just how important the decline in gasoline prices was to the collapse in overall retail sales last year, and how gasoline sales have been recovering much faster than overall retail sales. The retail sales numbers are seasonally adjusted and take into consideration things like the number of shopping days in a month. They are not, however, adjusted for price changes.
Gasoline sales are not totally unrelated to other retails sales, though. Every dollar a consumer puts into the pump at an Exxon (XOM) station is a dollar that he cannot spend at another store. The fall in gasoline prices played a big role in cushioning the decline in retail sales excluding gasoline.
The overall report was far stronger than expected. The consensus expectations were for an increase of 0.6% in retail sales overall, and for them to be up just 0.4% once auto sales were stripped out. The retail sales report is also in distinct contrast to the generally downbeat comp store sales that were reported by major retail chains last week.
However, there is one pretty important chain store that does not report monthly retail sales anymore — Wal-Mart (WMT). Sine Wal-Mart responsible for about 10% of all retail sales, that omission is significant. Also, there is still a fair amount of retail spending that happens in places that are not part of big, publicly traded firms, so even if Wal-Mart were still reporting its numbers, the picture from the chain stores would be incomplete.
The timing of this retail sales report could not have been better as we start the final push of the holiday retail sales season. Perhaps Santa is going to show up after all.
Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market-beating Zacks Strategic Investor service.
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